Before we begin, I must extend a word of apology to regular readers for my absence for the past three months. Life, as it sometimes does, has gathered pace – not least due to the demands of a recent promotion in my professional role, as well as the growing commitments of the podcast. Though I have not published since early January, I have remained ever watchful of the markets and reflective in spirit. I am pleased now to return to this forum and resume our ongoing conversation – one marked, I hope, by candour, discernment, and a shared commitment to thoughtful investing.
As the blossoms of spring begin to unfurl, I find myself reflecting on the recent 150th live recording of the Twin Petes Investing Podcast, held at the Master Investor Show this past Saturday. To those of you who joined us in person – thank you. Your support and encouragement made the occasion not only a milestone but a true celebration of the long-term investing spirit we hold dear. The show was a huge success for both Peter and I, and it was with no small degree of pleasure that we were able to meet so many members of our global audience in person for the first time. Indeed, I reflected at the time that there is there is a quiet reassurance in gathering with fellow market participants who favour patience over panic, and substance over speculation. Little did I know how much I would need that reassurance in the coming weeks.
In that same spirit of composure, I must offer a few thoughts on the latest ripples from across the Atlantic. Tariffs of 10% or more, levied upon nearly every major trading partner, have rekindled memories of past protectionist missteps. Yet history teaches us that quality endures, and panic, like fashion, is fleeting. With minimum tariffs of 10% applied to nearly every country on the planet – and some considerably higher – the world’s equity markets have started a dramatic rout for the first time in nearly two years. As with most market crises, however, such events should be met with calm resolve.
We have seen before the consequences of protectionist bluster – in the end, quality businesses with sound fundamentals weather these squalls far better than headlines suggest. As ever, those with a long horizon and a strong constitution are well served by staying the course. For my own part, my portfolio has not been immune to the panic engulfing markets but my value-seeking antennae are quivering at the potential for new bargains being unearthed in the market.
Closer to home, the new ISA season offers fresh opportunity for thoughtful capital deployment. I have been reviewing a number of prospective holdings which combine disciplined balance sheets with the capacity to compound income over time – the sort of businesses that quietly build generational wealth while others dash after the fashion of the moment. I have discussed some of these on the Twin Petes Investing podcast, but as alluded to in previous articles, my watchlist remains comprehensive and lengthy.
I shall share further reflections on those successful candidates that join my portfolio in due course, but suffice it to say: the market continues to present select, enduring opportunities for the patient investor.
Alongside this, the opening quarter of the year has seen some measured pruning of the portfolio. Notably, I have exited positions in Vodafone, S4 Capital, and NCC Group. Each of these companies has, in its own way, failed to meet the standards required of a holding worth of benefitting from long-term stewardship. Whether through strategic drift, eroding fundamentals, or persistent governance concerns, there comes a time when capital must be reallocated – not in haste, but with the quiet decisiveness that prudent management demands.
On the Art of Pruning: Reflections on Recent Portfolio Sales
As any seasoned gardener will attest, the act of pruning is not born of haste but of stewardship – a thoughtful removal that enables the whole to flourish. The first quarter of this year presented several such moments in the portfolio, prompting exits from Vodafone, S4 Capital, and NCC Group.
First purchased in 2021, and long-held by many as a staple of income portfolios, Vodafone has in truth become a byword for strategic inertia. Years of value-destructive acquisitions and muddled divestments have left the business a mere shadow of its potential. While management’s recent attempts at restructuring are not without merit, the patience of shareholders has been tested to its limits following a persistent decline in the share price and weakening fundamentals. With a fragile balance sheet, diminishing dividend cover, and intensifying competition across key markets, it became clear that continued exposure represented opportunity cost – capital that could be more profitably deployed elsewhere. As such, I took the decision to sell out of Vodafone for a 25% loss, including dividends, or around 6.25% annualised.
S4 Capital, by contrast, is a story of promise unmet. Initially hailed as a modern media darling, the company’s frenetic pace of acquisitions and its founder’s high-octane vision have given way to concerns over integration, accounting controls, and sustainability of margins. Markets tend to be forgiving of bold growth strategies – until the growth falters. The company’s repeated profit warnings and lack of operational discipline eroded my confidence since my initial investment in 2022. At a certain point, I deemed the company far more speculative than my strategy permits, and so I judged it prudent to preserve capital and reassess the sector from sturdier ground, divesting from the company for a 63% loss.
NCC Group, a cyber-security firm once considered a quiet compounder in a world of rising digital threats, has regrettably failed to convert opportunity into shareholder value. Despite a compelling backdrop for its services, the company has struggled to scale effectively, suffering from inconsistent execution and recurring leadership transitions. The departure of the CEO and subsequent profit warnings pointed not to a momentary wobble, but to deeper organisational malaise. In such cases, investors must ask not what a company could be, but what it has proven to be – and act accordingly. As such, my position was exited for a 36% loss including dividends.
In each of these decisions, I was guided not by the noise of the moment, but by a long-standing principle: that capital, once deployed, must be monitored not sentimentally but soberly. If a holding no longer serves the portfolio’s long-term aims – whether income, growth, or resilience – then the dignified course is to part ways.
On the Recent Flurry of Takeover Interest: Evaluating Shareholder Outcomes
Finally, I would be remiss not to touch upon the flurry of takeover interest currently sweeping across the portfolio. Warehouse REIT, Kenmare Resources, and Care REIT have all found themselves in the crosshairs of suitors, a reflection perhaps of the enduring value that lies beneath the surface of unloved UK equities. While it remains to be seen which, if any, of these approaches will ultimately crystallise, I view such attention as confirmation that value, though oft overlooked by the market, is not invisible to those with a discerning eye.
My largest holding, Warehouse REIT, has found itself the object of desire for Blackstone, the global private equity titan. After a series of rebuffed advances, Blackstone recently tabled a final all-cash proposal of 115 pence per share, valuing the enterprise at approximately £489 million. This proposition stands at a near 40% premium to the share price preceding the initial bid. The offer is currently non-binding, but the board will recommend it be accepted by shareholders if a firm offer is made.
Despite this seemingly good news, it is imperative to note that this offer still represents a discount to the company’s Net Asset Value (NAV), underscoring the opportunistic nature of the bid amidst prevailing market undervaluations. The board’s steadfastness in rejecting earlier, lesser proposals reflects a commendable commitment to shareholder value and the market is clearly sceptical of a deal being agreed, with the share price remaining at a discount to even the price proposed by Blackstone.
Care REIT, formerly known as Impact Healthcare REIT, has agreed to a £448 million acquisition by the American entity, CareTrust REIT. Shareholders are poised to receive 108 pence per share, marking a 32.8% premium over the pre-announcement share price. While this premium appears attractive, it is prudent to acknowledge that this offer also trails the company’s last reported EPRA Net Tangible Assets (NTA) by approximately 9.4%. The board’s acquiescence to this deal is indicative of the broader challenges faced by UK-listed REITs, particularly the persistent discounts to NAV that have beleaguered the sector. The infusion of capital from a larger, well-capitalized parent may furnish the necessary resources to navigate these headwinds and pursue growth opportunities.
Finally, Kenmare Resources, the esteemed mineral sands producer, received and rejected a non-binding proposal from a consortium comprised of Oryx Global Partners and former managing director Michael Carvill at 530 pence per share, saying it “undervalued Kenmare’s business and its prospects,”. Carvill stepped down from Kenmare’s board in August 2024 and currently serves as a consultant to the company.
The proposed deal represented a premium of 92.7% to Kenmare’s closing price of 275 pence on March 5, and valued the company at £472.9 million.
In each scenario, the calculus for shareholders hinges on a delicate balance between immediate liquidity at a premium and the potential for long-term value realisation. While the allure of a takeover premium is undeniable, one must weigh it against the intrinsic value and future prospects of the enterprise. As stewards of capital, it behooves us to approach such developments with a judicious blend of scepticism and foresight, ever mindful of the enduring principles that govern prudent investment.
As ever, I thank readers for your continued support and urge fellow investors to look past the clatter of headlines, to remain anchored in principle, and to remember: wealth built slowly is wealth built to last.